Now those following the list, the list as a whole is up 2% for the week. 39 stocks are up 5% or more and 10 stocks down 10% or more.
Here is the answer to most of the questions being asked about why the IBD 200 list.
Equity Selection is the key:
Stock selection is the key to success in trading. If the selected stock has a very high probability of going up, entry criteria, charts, technical analysis and many other things play a very small role.While most traders spend lot of time on the entry criteria and exit criteria and trying to determine best strategy for market timing, most of the time very little attention is paid to stock selection. If you are looking for superior returns and really outstanding returns, the most important thing to concentrate on is equity selection.
We know some of the critical factors which lead to stock price appreciation are earnings and earning momentum, one year relative strength,and favorable sector.Given a choice of 8000 stock , you must put your money behind the best stocks selected based on these criteria.
How is IBD 200 selected:
The IBD 200 selects stocks with a high probability of going up and which are currently favored by market. Now go back and look at how theIBD 200 stocks are selected. They are selected based on Investor Business Daily's proprietary SmartSelect Composite Rating. Now look at what goes in to that rating:
Composite Rating, SmartSelect®
# Earnings Per Share (EPS) Rating
# Relative Price Strength (RS) Rating
# Industry Group Relative Strength Rating
# Sales+Profit Margins+ROE (SMR) Rating
# Accumulation/Distribution Rating
The IBD SmartSelect Composite Rating combines all 5 SmartSelect Ratings into one easy-to-use rating. More weight is placed on EPS and RS Rating, and the stock's percent off its 52-week high is also included in the formula. Results are then compared to all other companies, and each company is assigned a rating from 1-99 with 99 being the best. A 90 rating means that the stock has outperformed 90% of all other stocks in terms of its combinedSmartSelect Ratings.
Why IBD 200 and not IBD 100:
Many stocks going in to IBD 100 have better part of their rally over by the time they are in top 100. The other problem is IBD 100 only focuses on stocks above a certain price level. Now price growth is not a function of its starting price. Sector and stock rotation means many times by the time stocks reachIBD 100 the sector is peaking. So the IBD 200 offers you a better universe to get in to stocks likely to make move and before they make the move Many of these stocks will not make it toIBD100 but before that they might make 200 to 300% or more price growth. Look at PTT a member of IBD 200 it meets all the CANSLIM criteria and has been up around 400% in last one quarter. Or TSTC or CHINA or SVNT and many others which have doubled in last one quarter but because they are below the thresh hold price for IBD 100 they are not in it.
What other entry criteria can be used:
Look at variety of entry criteria based on your risk preference and how much effort you are willing to put in.
* Look at entering on 2% breakout only if the earlier day was negative
* Enter only if last 4-6 week price growth is less than 25%
* Enter based on chart patterns
* Enter based only on 5% plus breakout
* Enter using techniques pioneered by Thomas R Demark
One of the biggest advantage of using this list is you are focusing on a very small number of stocks. You can anticipate good entry points, you can plan your entries and you can be assured that you will never miss a major rally. If you can not make money from these leading stocks, there is very low probability of you making money in the market as a whole. Don't take my word for it go back and test this list for several years. All the stocks which make a major move in a year are on this list. So if you want to beat the market just grab tomorrow's Investors Business Daily for $1.25
The earlier post:
How to beat the market for $1.25 per week